Government raises more than $250m from development - but does not spend it

The NSW government is sitting on a war chest of more than $250 million in unspent infrastructure taxes from property development – a pot set to increase by more than $830 million in the next few years.

An audit report into the Department of Planning and Environment, released on Thursday, depicts a wide gap between the money the government has raised from developers for local infrastructure, and the volume of those funds it has put back into projects.

In 2017, the DPE collected almost $115 million in infrastructure contributions. But it spent only $8.4 million on infrastructure projects.

A so-called planned precinct at Rhodes on the Parramatta River is one of the areas in which the government has proposed Special Infrastructure Contributions.

The DPE told the Audit Office it expects to ramp up spending on local infrastructure and distribute $949 million in contributions from developers over the next few years.

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In its report, however, the Audit Office said it would be “challenging” for the department to spend so much, given what it had spent over the past four years.

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The wide gap between the amount of money raised by the DPE, and the amount it spends on community services, was criticised by Labor and developer groups.

“When new homebuyers pay tens of thousands of dollars in infrastructure taxes, they expect their money to go towards infrastructure in their region,” the chief executive of the Urban Development Institute of Australia NSW, Steve Mann, said.

The DPE raises money from developers through so-called Special Infrastructure Contributions (SICs) and Voluntary Planning Agreements (VPAs) levied on developers. Local councils also often agree to VPAs with developers.

According to the DPE, there is generally a time lag between raising and being able to spend money on suitable projects. The DPE spent only about 16 per cent of the $273 million it raised between 2014 and 2017. But in 2018 it raised $105 million and spent $86 million.

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“We understand the department needed to accumulate SIC and VPA revenue until the balance was sufficient to deliver infrastructure but the community quite rightly has frustrations with development when there is a delay,” Mr Mann said.

“It is negligence of the highest order to hoard a quarter of a billion dollars earmarked for crucial community infrastructure instead of putting it to good use helping communities to cope with ever increasing development,” Ms Mihailuk said.

A spokesman said the department was on track to spend more than $75 million in 2018-19, and was selecting and reviewing projects to receive funding.

“The expenditure program is forecast to increase significantly from 2019/20 as projects reaching construction phase,” the spokesman said.

“Based on the design work currently underway, over $1.2 billion in construction is expected in future years.”

Under Mr Roberts, the DPE has proposed increased use of SICs in development areas such as Rhodes, Sydney's north-west suburbs, Macarthur and Wilton.

Jane Fitzgerald, the Property Council NSW executive director, said a Good Growth Alliance recently formed between her organisation and others had called for an inquiry into how infrastructure was funded.

“It’s important that we spend the right money in the right places at the right time – what this data shows is that there is money in the bank to be spent on critical infrastructure, projects needed to support good growth," Ms Fitzgerald said.